Satara Cattle Feed Industries P.Ltd., Satara V. ACIT,Satara Circle, Satara, Satara

ITA 617/PUN/2008

• Counselvise Citation: 61724514 RSA 2008
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAURATH
• Keywords: Unexplained investment; Depreciation; Business expenditure; Assessment record; Unabsorbed depreciation
• Section: 143(3); 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 617/PN/08 (ASSTT. YEARS: 2003-04) SATARA CATTLE FEED INDUSTRIES P LTD. .. APPELLAN T A7. MIDC, SATAR PAN AAHCS0300H VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. R ESPONDENT SATARA CIR., SATARA APPELLANT BY: SHRI M K KULKARNI RESPONDENT BY: SHRI J S NAURATH ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E REVISIONAL ORDER OF THE COMMISSIONER OF INCOME-TAX-III, PUNE ( IN SHORT THE COMMISSIONER) DATED 28.3.2008 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), SETTING ASIDE THE ORDER DATED 21.10.2005 PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) OF THE ACT, PERTAINING TO THE ASSESSMENT YEA R 2003-04. 2. IN THIS APPEAL BY THE ASSESSEE, CHALLENGE IS MADE T O THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT ON TH E GROUND THAT HE WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AS THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS NEITHER ERRONEO US NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE FACTS, IN BRIEF, ARE THAT IN THE INSTANT CASE, A SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT, VIDE ORDER DATED 21.10.2005, DETERMINING THE TAXABLE INCOME AT RS 6,74,500/-. SU BSEQUENTLY, THE COMMISSIONER EXAMINED THE ASSESSMENT RECORDS AND NO TICED FEW ERROR AND OMISSIONS IN THE ORDER MADE BY THE ASSESSING OFFICE R. HE NOTICED THAT PRIOR TO THE 2 MAKING OF THE ASSESSMENT, A SURVEY UNDER SECTION 13 3A OF THE ACT WAS CARRIED OUT IN THE ASSESSEES BUSINESS PREMISES ON 15.5.200 2,DURING THE COURSE OF WHICH EXCESS STOCK OF RS 18,44,760/- WAS FOUND. AT THE TI ME OF SURVEY, THE ASSESSEE HAD STATED THAT IT WOULD BE ADMITTING THE EXCESS ST OCK AS ITS ADDITIONAL INCOME IN THE RETURN TO BE FILED FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION. HOWEVER, IN THE RETURN OF INCOME FILED SUBSEQUENTLY THE ASSESSE E ADMITTED TOTAL INCOME OF RS 5,84,220/- ONLY. IT WAS NOTICED THAT THE INCOME WA S THUS RETURNED ON A LOWER LEVEL EVEN WHILE CREDITING EXCESS STOCK OF RS 18,44 ,760/- TO THE TRADING ACCOUNT MAINLY BECAUSE THE ASSESSEE SHOWED SUBSTANTIALLY LO WER GROSS PROFIT IN THE POST- SURVEY PERIOD AS COMPARED THE GROSS PROFIT N THE PR E-SURVEY PERIOD. ACCORDING TO THE COMMISSIONER, THE ASSESSEE ALSO CLAIMED DISPROP ORTIONATELY HIGHER EXPENSES IN RESPECT OF SEVERAL ITEMS THAN THAT CLAI MED FOR THE PRECEDING ASSESSMENT YEAR. ACCORDING TO THE COMMISSIONER, WH ILE THE PREDECESSOR ASSESSING OFFICER, WHO STARTED THE ASSESSMENT PROCE EDINGS HAD RAISED SEVERAL QUERIES IN THE MATTER OF ALLEGED DECLINE IN THE GRO SS PROFIT MARGIN DURING THE POST- SURVEY PERIOD, THE SUCCESSOR ASSESSING OFFICER, WHO EVENTUALLY MADE THE ASSESSMENT, DID NOT CARRY THE EARLIER ENQUIRIES TO THEIR CONCLUSION AND ACCEPTED THE ASSESSEES EXPLANATION ON THE ISSUE OF GROSS PR OFIT WITHOUT MAKING ANY USE OF THE WORKINGS MADE BY THE PREDECESSOR, WHICH WERE AL SO AVAILABLE ON RECORDS AND WHICH GAVE CLEAR INDICATION THAT IN FACT AT THE TIME OF SURVEY EXCESS STOCK HAD BEEN SHORT-QUANTIFIED. FURTHER, THE SUCCESSOR A SSESSING OFFICER ACCEPTED THE ASSESSEES SUBMISSION THAT THE RETURNED INCOME WAS LOW BECAUSE OF INCREASE IN EXPENSES WITHOUT CALLING FOR AND EXAMINING THE REQU IRED FACTS AND EVIDENCES IN SUPPORT OF SUCH INCREASE. ANOTHER ERROR NOTICED BY THE COMMISSIONER WAS THAT IN THE RETURN OF INCOME FILED, THE ASSESSEE HAD BROUGH T FORWARD AND SET OFF UNABSORBED DEPRECIATION OF RS 8,56,147/- AGAINST TH E PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT, WHICH ACCORDING TO THE COMMISSIONER W AS ERRONEOUS SINCE THE PROFIT AS PER PROFIT & LOSS ACCOUNT INCLUDED THE AD DITIONAL INCOME OF RS 18,44,760/- WHICH, BEING THE ADDITIONAL INCOME DECL ARED WITH REFERENCE TO THE EXCESS STOCK, WAS NOT IN THE NATURE OF INCOME FROM BUSINESS; AND, THEREFORE, THE 3 SET OFF WAS NOT ADMISSIBLE. THE ASSESSING OFFICER D ID NOT RECTIFY THE ABOVE ERROR WHILE MAKING THE ASSESSMENT. 3. AFTER EXAMINING THE RECORDS WHICH INDICATED THE AFORESAID ERRORS AND OMISSION ON THE PART OF THE ASSESSING OFFICER, THE COMMISSIONER CAME TO A CONCLUSION THAT THE ASSESSMENT ORDER DATED 21.10.20 05 PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICI AL TO THE INTERESTS OF REVENUE. 4. BEFORE THE COMMISSIONER, IT WAS CONTENDED ON B EHALF OF THE ASSESSEE THAT EACH AND EVERY ASPECT OF THE ASSESSMENT VIS-- VIS SURVEY ACTION WAS EXAMINED BY THE ASSESSING OFFICER AND THAT A DIFFER ENT INFERENCE CANNOT BE DRAWN MERELY BECAUSE THE ASSESSING OFFICER DID NOT DISCUSS THESE ASPECTS IN THE ASSESSMENT ORDER. RELIANCE WAS PLACED ON THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V EICHER LTD 294 ITR 310 ( DEL) WHEREIN IT WAS OBSERVED THAT IN AN ASSESSMENT ORDER ONLY SUCH POINTS ARE DI SCUSSED ON WHICH THE ASSESSEES EXPLANATIONS ARE REJECTED AND ADDITIONS/ DISALLOWANCES ARE MADE. IT WAS ALSO STATED THAT THERE WAS NO MERIT IN THE OBJE CTION RAISED IN NOTICE UNDER SECTION 263 RELATING TO THE SET OFF OF UNABSORBED D EPRECIATION OF RS 8,56,147/- AGAINST THE PROFIT OF THE YEAR WHICH INCLUDED THE A DDITIONAL INCOME DECLARED AT THE TIME OF THE SURVEY INASMUCH AS IN A NUMBER OF JUDGM ENTS IT HAS BEEN HELD THAT SUCH UNEXPLAINED INVESTMENT IS IN THE NATURE OF INC OME FROM BUSINESS. RELIANCE WAS PLACED ON THE DECISION OF PUNE BENCH IN ITA NO 443/PN/04 ETC. DATED 29.7.2005. FURTHER IT WAS STATED THAT ADMISSION MAD E IN A STATEMENT RECORDED DURING THE COURSE OF SURVEY HAS NO EVIDENTIARY VALU E AND THUS CANNOT BE MADE THE BASIS FOR MAKING AN ADDITION, AS HELD BY THE HO NBLE MADRAS HIGH COURT IN THE CASE OF CIT V S KHADER KHAN & SONS 214 CTR 589 (MAD ). 5. AFTER CONSIDERING THE VARIED SUBMISSIONS OF THE ASSESSEE, THE COMMISSIONER ULTIMATELY HELD, ON THE BASIS OF THE F ACTS AVAILABLE ON RECORD, THE ASSESSING OFFICER MADE THE ASSESSMENT FOR THE IMPUG NED ASSESSMENT YEAR WITHOUT PROPERLY CONSIDERING THE FACTS AND EVIDENCE S AVAILABLE ON RECORD AND WITHOUT CARRYING ON SUCH FURTHER EXAMINATION AS WER E WARRANTED AND MERELY ON THE BASIS OF AN UNCORROBORATED GENERAL SUBMISSION M ADE BY THE ASSESSEE. THE 4 COMMISSIONER ACCORDINGLY HELD THAT THE ASSESSMENT O RDER DATED 21.0.2005 PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS INSOF AR AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. HE ACCORDINGLY SET ASIDE THE ASSESSMENT WITH A DIRECTION TO THE ASSESSING OFFICER TO REDO THE SAME AFRESH AFTER SPECIFICALLY CALLING FOR ALL THE RELEVANT FACTS AND EVIDENCES RELATING T O EXCESS STOCK, AFTER QUANTIFYING THE EXCESS STOCK CORRECTLY AFTER EXAMINING ON THE B ASIS OF FACTS AND EVIDENCES THE CORRECTNESS OF THE GROSS PROFIT MARGIN SHOWN BY THE ASSESSEE FOR THE ENTIRE PREVIOUS YEAR IN GENERAL AND OR THE POST SURVEY PER IOD IN PARTICULAR, AND AFTER CAREFULLY EXAMINING THE CORRECTNESS OR OTHERWISE OF THE RETURNED INCOME. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT HAS VEHEMENTLY POINTED OUT THAT THE COMMISSIONER WAS NOT JUSTIFIED IN INVO KING THE PROVISIONS OF SECTION 263 OF THE ACT IN THIS CASE, AS THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO TH E INTERESTS OF REVENUE. IT HAS BEEN POINTED OUT THAT THE ASSESSEE DID NOT RETRACT FROM ITS DECLARATION REGARDING THE DIFFERENCE IN STOCK FOUND AT THE TIME OF SURVEY AND THAT THE SAME WAS DULY CREDITED IN THE PROFIT AND LOSS ACCOUNT. MERELY BEC AUSE THE RETURNED INCOME WAS LOWER THAN THE DECLARATION MADE FOR DIFFERENCE OF S TOCK DURING THE SURVEY CANNOT BE A GROUND TO HOLD THAT THE ASSESSMENT ORDER ACCEP TING SUCH POSITION WAS ERRONEOUS IN THE EYES OF AW. IT HAS BEEN POINTED OU T THAT THE RETURNED INCOME HAS BEEN COMPUTED AFTER TAKING INTO CONSIDERATION T HE DIFFERENCE IN STOCK DECLARED DURING THE SURVEY AND THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE REDUCTION IN PROFIT AFTER CONSIDER ING THE SURVEY DECLARATION WAS A SUBJECT MATTER OF EXAMINATION BY THE ASSESSING OFFI CER. THE REASONS FOR SUCH A REDUCTION WERE ALSO CALLED FOR AND SUBMITTED BY THE ASSESSEE AND SINCE NO ADDITION ON THIS COUNT HAS BEEN MADE, THERE IS A PR ESUMPTION THAT THE EXPLANATIONS OF THE ASSESSEE WERE DULY ACCEPTED BY THE ASSESSING OFFICER. THUS, THE ASSESSING OFFICER HAD DULY APPLIED HIS MIND ON THE ISSUE AND SINCE THE EXPLANATION OF THE ASSESSEE WAS ACCEPTED, IT DID NO T WARRANT ANY FURTHER DISCUSSION IN THE ASSESSMENT ORDER. IN THIS REGARD, REFERENCE WAS MADE TO THE 5 JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V EICHER LTD 294 ITR 310 (DEL) FOR THE PROPOSITION THAT MERELY BECAUSE T HE ISSUES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AS NO DISCUSSION IS FOUND IN THE ASSESSMENT ORDER, WOULD NOT SHOW NON-APPLICATION OF MIND AS ONLY SUCH POINTS ARE TAKEN NOTE OF IN THE ASSESSMENT ORDER WHERE THE ASSESSEES EXPLANATI ON IS REJECTED AND ADDITION MADE. IT WAS, THEREFORE, SUBMITTED THAT THE COMMISS IONER IS WRONG IN INFERRING THAT THE ASSESSMENT HAS BEEN MADE WITHOUT PROPER AP PLICATION OF MIND. THE LEARNED COUNSEL ALSO REFERRED TO THE JUDGMENT OF TH E HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V DEEPAK MITTAL 37 DT R 7 (P&H) AND SUBMITTED THAT IN CASES WHERE A SURVEY ACTION UNDER SECTION 1 33A HAS BEEN CARRIED OUT AND ASSESSMENT MADE ON THE BASIS OF THE SURVEY MATERIAL , THERE IS NO JUSTIFICATION FOR INVOKING OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS DEFENDED THE ACTION OF THE COM MISSIONER. IT HAS BEEN VEHEMENTLY POINTED OUT THAT THE ASSESSING OFFICER A CCEPTED THE EXPLANATION OF THE ASSESSEE WITHOUT PROPER ENQUIRY AND THEREFORE, THE COMMISSIONER WAS JUSTIFIED IN HOLDING THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE WITHIN THE MEANING OF SECT ION 263 OF THE ACT. OUR ATTENTION HAS BEEN DRAWN TO THE DETAILED DISCUSSION MADE BY THE COMMISSIONER IN THE IMPUGNED ORDER TO WHICH WE HAVE ALREADY REFE RRED TO IN PARAS 2 TO 5 OF OUR ORDER AND THE SAME IS NOT BEING REPEATED FOR THE SA KE OF BREVITY. IN SUM AND SUBSTANCE, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS DEFENDED THE ACTION OF THE COMMISSIONER AND REFERRED TO THE FOLLOWING PRON OUNCEMENTS IN SUPPORT OF THE CASE OF THE REVENUE: (I) M/S CHOKKAIYAN KARTHIKEYAN & CO. V. ACIT 2011 -TIOL-144- ITAT-MAD. (II) M/S M. G. MOTORS V. ITO 2008-TIOL-136-ITAT-D EL (III) F. L. SMIDTH LTD. V. ACIT 2009-TIOL-419-ITA T-MAD 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE IS ENGAGED IN THE 6 BUSINESS OF MANUFACTURING OF CATTLE FEED PRODUCTS A ND IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 DECLARING AN INCOME OF RS 5,84,220/-. A SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CARRIED OU T AT THE BUSINESS PREMISES OF THE ASSESSEE ON 15.5.2002 DURING WHICH EXCESS STOCK OF RS 18,44,760/- AND EXCESS CASH OF RS 1,90,740/- WAS DETECTED, WHICH WA S AGREED TO BE DECLARED AS AN ADDITIONAL INCOME BY THE ASSESSEE OVER AND ABOVE HIS REGULAR INCOME. THE ASSESSEE DULY SHOWED EXCESS STOCK OF RS 18,44,760/- SEPARATELY IN THE PROFIT & LOSS ACCOUNT AND THE EXCESS CASH OF RS 1,90,740/- W AS ALSO SHOWN SEPARATELY UNDER THE HEAD OTHER INCOME IN THE PROFIT & LOSS AC COUNT ENCLOSED WITH THE RETURN OF INCOME. THE SAID RETURN WAS SUBJECT TO A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT WHEREBY THE TOTAL INCOME WAS DETERMINED AT RS 6,74,500/- AFTER MAKING CERTAIN ADDITIONS OUT OF TR AVELLING EXPENSES, OFFICE EXPENSES, INTEREST ETC. SUBSEQUENTLY, THE COMMISSIO NER HAS HELD SUCH AN ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT AND, H AS SET ASIDE THE SAME WITH DIRECTIONS TO THE ASSESSING OFFICER TO RE-DO THE AS SESSMENT AFRESH IN PARTICULAR AFTER CAREFULLY EXAMINING THE CORRECTNESS OR OTHERW ISE OF THE RETURNED INCOME . THE PRIMARY REASON WHICH HAS WEIGHED WITH THE COMMI SSIONER TO SET ASIDE THE ASSESSMENT AND DIRECT THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT IS THE FACT THAT INSPITE OF CREDITING ADDITIONAL INCOME ON ACCOUNT OF EXCESS STOCK OF RS 18,44,760/- TO THE PROFIT & LOSS ACCOUNT, THE INCOM E FINALLY RETURNED BY THE ASSESSEE WAS RS 5,84,220/- ONLY. IN PARA 4.1 OF THE IMPUGNED ORDER, THE COMMISSIONER HAS RECORDED THAT WHILE MAKING THE ASS ESSMENT, THE ASSESSING OFFICER DID NOT EXAMINE THE REASONS FOR THE ASSESSE E HAVING RETURNED SUCH LOW INCOME, WHICH WAS FAR LESS THAN EVEN THE ADDITIONAL INCOME DECLARED AT THE TIME OF SURVEY. IN SUM AND SUBSTANCE THE THRUST OF THE I NVOKING OF SECTION 263 OF THE ACT BY THE COMMISSIONER IS THAT THE ASSESSEE HAS DE CLARED INCOME IN THE RETURN EVEN LOWER THAN THE ADDITIONAL INCOME THAT WAS AGRE ED DURING THE SURVEY TO BE DECLARED OVER AND ABOVE THE REGULAR INCOME. ACCORDI NG TO THE COMMISSIONER, THE ASSESSING OFFICER HAS FAILED TO APPLY HIS MIND OR F URTHER EXAMINATION OF THE FACTS 7 AND EVIDENCES AVAILABLE ON RECORD, AND THEREFORE, A CTION UNDER SECTION 263 OF THE ACT WAS WARRANTED. 9. IN THIS CONNECTION, IT IS A WELL SETTLED PROPOSI TION WITH REGARD TO SCOPE OF SECTION 263 OF THE ACT THAT THE TWIN CONDITIONS, NA MELY, THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF RE VENUE ARE REQUIRED TO BE SATISFIED CUMULATIVELY. IN OTHER WORDS, BEFORE INVO KING SECTION 263 OF THE ACT, THE COMMISSIONER HAS TO BE SATISFIED THAT THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS AS WELL AS PREJUDICIAL T O THE INTERESTS OF REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. V. CIT 243 ITR 83 HAS EXPLAINED RATIONALE OF THE EXPRESSION PREJUDIC IAL TO THE INTERESTS OF REVENUE. THE HONBLE APEX COURT EXPLAINED THAT IF DUE TO AN ERRONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOOSING TAX LAWFU LLY PAYABLE BY A PERSON, IT WOULD CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF REVENUE. IN OTHER WORDS, AS PER THE HONBLE SUPREME COURT, THE ORDER OF THE ASSESSI NG OFFICER MUST SUFFER FROM AN INCORRECT ASSUMPTION OF FACT OR INCORRECT APPLIC ATION OF LAW SO AS TO BE CONSIDERED AS ERRONEOUS APART FROM MEETING THE REQU IREMENTS OF THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF REVENUE, IN ORDER TO QUALIFY FOR INVOKING OF SECTION 263 BY THE COMMISSIONER. 10. IN THE LIGHT OF THE ABOVE DISCUSSION, WE MAY NO W EXAMINE THE MANNER IN WHICH THE ASSESSING OFFICER HAS DEALT WITH THE ISSU E POINTED OUT BY THE COMMISSIONER IN THE IMPUGNED ORDER. IN PARA 9 OF TH E ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT THOUGH THE ASSESSE E HAS SHOWN EXCESS STOCK OF RS 18,44,760/- AND EXCESS CASH OF RS 1,90,740/- AS ADDITIONAL INCOME BY CREDITING IN THE PROFIT & LOSS ACCOUNT, THE INCOME FINALLY RETURNED WAS LOWER. HE HAS ALSO REFERRED TO THE DISCUSSION AND THE WRITTEN SUBMISSIONS MADE BY THE ASSESSEE BEFORE HIM REGARDING THE SHORT-FALL IN INC OME RETURNED AFTER CONSIDERING THE DECLARATION OF ADDITIONAL INCOME DURING SURVEY, IN COMPARISON TO THE PROFITS DECLARED IN THE PRECEDING YEAR. FURTHER THE ASSESSI NG OFFICER HAS REFERRED TO THE REASONS FOR THE SHORT-FALL IN THE PROFIT AS BEING O N ACCOUNT OF INCREASE IN SOME OF 8 THE BUSINESS EXPENSES WHICH HAVE BEEN ENUMERATED IN THE ASSESSMENT ORDER, NAMELY: 1) COST OF MAN POWER (WAGES), 2) TRANSPORT CHARGES (HIKE IN PETROL & DIESEL PRIC ES), 3) DIESEL & OIL & GREASE (HIKE IN PETROLEUM PRODUC TS), 4) INTEREST (DUE TO INCREASE IN WORKING CAPITAL AN D LOANS), 5) DEPRECIATION (DUE TO ADDITIONS IN ASSETS) IT IS QUITE CLEAR THAT AFTER NOTICING SUCH SUBMISSI ONS AND THE REASONS FOR THE SHORT- FALL, THE ASSESSING OFFICER HAS NOT MADE ANY ADVERS E COMMENTS, MEANING THEREBY THAT SUCH REASONS HAVE BEEN FOUND TO BE SAT ISFACTORY FOR THE SHORT-FALL IN PROFITS. QUITE CLEARLY NO ADDITION ON THIS COUNT HA S BEEN MADE TO THE RETURNED INCOME. IN THE BACKGROUND OF SUCH A DISCUSSION AVAI LABLE IN THE ASSESSMENT ORDER, PRIMA FACIE IT IS NOT POSSIBLE TO CONCUR WIT H THE OBSERVATION OF THE COMMISSIONER THAT THE ASSESSING OFFICER HAS NOT APP LIED HIS MIND TO THE FACT THAT THE ASSESSEE HAS RETURNED A FINAL INCOME LOWER THAN THE ADDITIONAL INCOME DECLARED DURING THE SURVEY ON ACCOUNT OF EXCESS STO CK. IN FACT, NOTICING OF THE REASONS FOR THE SHORT-FALL IN PROFIT ITSELF CLEARLY DEMONSTRATES AWARENESS OF THE ASSESSING OFFICER ON THIS ASPECT AND IN THE ABSENCE OF ANY ADVERSE COMMENTS, IT SHOWS THAT THE REASONS HAVE BEEN ACCEPTED. THE COM MISSIONER HAS FURTHER POINTED OUT THAT THE ASSESSING OFFICER MERELY ACCEP TED THE REASONS ADVANCED WITHOUT FURTHER EXAMINATION. IN THIS CONTEXT, THE C OMMISSIONER HAS ALSO REFERRED TO A DETAILED WORKING AS REGARDS THE CORRECTNESS OF THE EXCESS STOCK ITSELF AND SUCH WORKINGS ARE CLAIMED TO BE AVAILABLE ON RECORD , AS WORKED OUT BY THE PREDECESSOR ASSESSING OFFICER. IN OUR CONSIDERED OP INION, EVEN THE WORKINGS REFERRED TO BY THE COMMISSIONER ARE ONLY ESTIMATES AND, IN ANY CASE, THERE IS NO MATERIAL OR EVIDENCE FOUND BY THE COMMISSIONER TO S AY THAT THE REASONS WHICH HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER FOR EVA LUATING THE SHORT-FALL IN PROFIT ARE INCORRECT OR THE SAME ARE EXTRANEOUS OR FALSE. THERE IS NO CASE MADE OUT BY THE COMMISSIONER THAT THE EXPLANATION FURNISHED BY THE ASSESSEE, NAMELY, 9 INCREASE IN BUSINESS EXPENSES AND CONSEQUENTIAL SHO RT-FALL IN PROFITS ARE DEVOID OF ANY FACTUAL SUPPORT. THEREFORE, IT IS A CASE WHE RE THE COMMISSIONER HAS INTENDED TO SUBSTITUTE HIS OWN VIEW IN PLACE OF THA T OF THE ASSESSING OFFICER WITHOUT POINTING OUT AS TO HOW THE ACTION OF THE AS SESSING OFFICER IS ERRONEOUS IN LAW OR ON FACTS. THEREFORE, UNDER THESE CIRCUMSTANC ES, IN OUR VIEW, THE CONDITION OF THE ASSESSMENT ORDER BEING ERRONEOUS IN LAW OR O N FACTS AS MANDATED IN SECTION 263 OF THE ACT IS NOT FULFILLED IN THE PRES ENT CASE. IN OUR VIEW, THE COMMISSIONER ERRED IN INVOKING HIS JURISDICTION UND ER SECTION 263 AND SETTING ASIDE THE IMPUGNED ASSESSMENT ORDER PASSED BY THE A SSESSING OFFICER. WE ACCORDINGLY QUASH THE ORDER PASSED BY THE COMMISSIO NER UNDER SECTION 263 OF THE ACT AND RESTORE THAT OF THE ASSESSING OFFICER. THE ASSESSEE SUCCEEDS IN ITS APPEAL. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 31 ST MAY, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. THE ACIT, SATARA CIR., SATARA 3. THE CIT-III, PUNE 4. THE D.R, B BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE